tax in which the percentage of income paid in tax is the same regardless of the level of income; if the tax rate is 20 percent, then an individual with a $10, 000 in taxable income pays 2,000 dollars in taxes and a person with a 100,000 dollars taxable income will pay 20,000

Term

What is a regressive tax?

Definition

people with lower incomes pay higher taxes; the percentage of income goes down as income rises

Term

What is a progressive tax?

Definition

a tax that imposes a high percentage rate of taxation on higher incomes than on lower ones; percentage of income paid in tax rises as level of income rises

Term

What are FICA taxes?

Definition

federal insurance contributions act; levied on employers and employees to support social security and medicare

Term

What does the benefit principle of taxation say? example?

Definition

those who benefit from government goods and services should pay in proportion to the amount of benefits they receive; belief that taxes should be paid according to benefits regardless of income; an example of this would be gasoline taxes because those who drive more pay more gas taxes

Term

What is the ability to pay principle of taxation? example?

Definition

the belief that people should be taxes according to their ability to pay, regardless of the the benefits they receive; an example of this would be the individual income tax which requires people with higher incomes to pay more than those who earn less

Term

What are excise taxes? example?

Definition

a tax on the manufacture or sale of selected items such as gasoline and liquor

Term

do excise tend to be regressive or progressive?

Definition

regressive

Term

What are property taxes?

Definition

a tax on tangible and intangible possessions such as real estate, buildings, furniture, stocks, bonds, and bank accounts.

a general state or city tax levied on a product at the time of sale; food and medicine

Term

What is tax incidence? inelastic demand goods are likely to fall upon the ____, elastic demand goods are likely to fall upon the ____.

Definition

the final burden of the tax--who actually pays the tax; the final consumer and the final producer

Term

The ____gets money from the income tax. The ____gets money from the sales tax. The ____gets money from the property tax.

Definition

federal government; state; local government

Term

What are transfer payments? examples?

Definition

payment where the government receives neither goods nor services in return; social security or unemployment compensation

Term

What are the two types of government spending?

Definition

the government needs goods and services and they give wages and salaries in return for those goods and services; transfer payments are those in which the government does not get anything in return such as unemployment compensation

Term

What is the federal deficit?

Definition

annual government spending in excess of taxes and other revenues

Term

What is national debt?

Definition

total amount borrowed from investors to finance the government's deficit spending

Term

What is discretionary spending? example?

Definition

spending that must be approved by congress in the annual budgetary process; annual defense spending must be approved by the congress

Term

What is mandatory spending? example?

Definition

federal spending authorized by law that continues without the need for annual approvals by Congress; spending for social security

Term

What are entitlements?

Definition

program or benefit using established eligibility requirements to provide health, nutritional, or income supplements to indivduals

Term

What is the "public" portion of the national debt?

Definition

the money we owe to ourselves so it is not a huge issue; however some of the public debt is owned by foreigners so it makes it more difficult for the US to have power in the economy when it comes to that debt

Term

Top foreign holders of the US debt?

Definition

China and Japan and the OPEC and shady carribean banks

Term

What are the three major criteria for taxes?

Definition

equity, simplicity, efficiency

Term

What are tax loopholes?

Definition

exceptions to the law that allow some people/business to get out of paying taxes

Term

Taxes generally are viewed as being fairer if they have fewer _____, _____, and _____.

Definition

exceptions, deductions, and exemptions

Term

What is a difficult tax to understand? easy tax?

Definition

individual income tax; sales tax

Term

What are the two principles of taxation?

Definition

the benefit principle; ability to pay principle

Term

what are the two cons of the benefit principle?

Definition

those who receive government servies are sometimes the ones who can least afford to pay for them; benefits are hard to measure--not just the drivers benefit from the taxes paid by gasoline